Contracts-for-difference (CFDs) are currently undergoing a significant period of change, with regulatory control on financial trading having tightened in recent years as regulators seek to crack down on dishonest and non-compliant brokers.

Tighter policies have been widely imposed and introduced by regulators worldwide. Last November, the Cyprus Securities and Exchange Commission (CySEC) issued a circular relating to the marketing and sale to retail clients of financial CFDs and other speculative products. In March, the circular prohibited Cypriot Investment Firms from offering bonuses as an incentive to retail clients to trade in complex speculative products.

Similarly, at the end of last year in the UK, the Financial Conduct Authority proposed changes on CFDs to enforce appropriate protection for consumers and ensure that retail clients were better informed about CFD products. Elsewhere, a non-EU regulator, the Australian Securities and Investments Commission, has given its backing to a new bill passed by the Australian government, limiting how financial services licensees in relation to over-the-counter derivative products use client money.

These enhanced rules need not deter brokers from operating however, but can instead provide an opportunity for fewer but compliant brokers to survive in a more strongly regulated market.

This is the case for a number of companies, including 24option, a Cypriot CFDs broker, which is exploring ways to put responsible trading at the core of its business model in response to these changes. The firm has established an elaborate onboarding procedure that prevents clients with inadequate knowledge and experience from trading. The company offers round-the-clock customer support on the platform and one-to-one sessions with representatives to address any questions clients may have regarding its products and platforms. The combination of imposing restrictions on who can trade on their platform and who can’t, and a focus on education aims to make 24option a frontrunner in the industry.

Furthermore, individuals who complete the onboarding process gain access to further training under the guidance of Alpesh Patel, a leading trading expert with whom the Cypriot Investment Firm has partnered, and who is helping the company to put education at the core of its offering and promote responsible trading.

“Education is the silver bullet in all things,” said Patel. “The promise of online trading is too often not delivered upon. My job for 20 years, from my books on online trading to my shows on Bloomberg TV, to my Diary of an Internet Trader column in the FT, has always been to champion the private investor. Before I became the CEO of an asset management company – I too was a private investor. I want to make sure 24option have the best education and training in the industry and the best practices. To be the best does not happen overnight. But it happens with commitment. And they’ve shown they are committed when it would have been easier no to”.

However, with every trade comes risk, so what should potential traders consider before engaging in a trading platform? Here are seven key points that all individuals should observe before entering the trading world:

Ensure you are familiar with the investment product and the associated risks

Avoid trading on emotions

Conduct thorough technical and fundamental analysis and research before entering a trade

Invest in your education by exploring risk and money management strategies and evaluating the risks

Consider your level of experience. If you do not feel confident, educate yourself and consider practising using virtual funds

Review your budget before entering a trade: can you afford to lose this amount of money?

Review your overall financial situation: do you have enough money to make a deposit?

The CFD investment product is likely to experience further changes over the next few years, with innovative and forward-thinking brokers predicted to be those that adapt to the change, respond to new regulatory controls, provide education and promote responsible trading. Those that fail to do so will likely see themselves edged out of the market, leaving the field open to compliant players to compete for leadership in the market.

The content of this article constitutes Marketing Communication and does not qualify as Investment Advice or Investment Research. This article is produced by Contentive. Any views or opinions presented within this article are solely those of the author and do not necessarily represent those of Rodeler Ltd. The article is of a general nature and does not take into consideration individual readers’ personal circumstances, investment experience and current financial situation. Rodeler Ltd accepts no liability for the content of this article, or for the consequences of any actions taken on the basis of the information provided.